Nike says it will reduce its staff by about 2 percent, as part of a reorganization aiming to accelerate its business and to target urban consumers more directly. Since Nike reported more than 70,000 employees at the end of its last full fiscal year, the cuts would affect about 1,400 people, but the company declined to provide any indications about the locations or the functions of the people involved.
Nike also announced its Consumer Direct Offense, a new strategy that would take more advantage of digital technology to connect directly with consumers. The group says the changes are intended to adjust to a market that has become faster and more personalized.
Along the same lines as Creating the New, the five-year strategy launched by the Adidas Group two years ago, Nike intends to accelerate product creation and to focus on 12 cities in ten countries. Five of the countries are in Europe - the U.K., Germany, France, Spain and Italy - and five are the target cities in Europe: London, Berlin, Paris, Barcelona and Milan. The others are New York, Los Angeles, Beijing, Shanghai, Tokyo and Seoul. They are predicted to make up 80 percent of Nike's growth through 2020. In another move that is reminiscent of Adidas' tactics, the Swoosh wants to slash the number of styles by 25 percent and offer a deeper selection of key franchises.
Nike explains that its new approach is fueled by Triple Double, a strategy that it outlined in March to double innovation, speed up production and make more direct connections with consumers. The product creation cycle is to be reduced by half, starting with the Express Lane program, which quickly replenishes products in response to consumer demand. Express Lane is already operational in North America and Europe, and will come on stream in China over the next few weeks.
In order to streamline the entire process from design to delivery, Michael Spillane has been appointed to the new role of president of categories and product. Nike will deploy resources in the categories that are thought to have the strongest growth potential, from running to basketball, sportswear, training, global football and young athletes. A new women's team will complement each of these categories. Spillane was previously vice president and general manager of global footwear, after assignments as chief executive of Converse and Umbro.
Furthermore, Nike is creating a Nike Direct organization to increase its direct connections with consumers and adjust to the changed retail landscape. Nike Direct is to be led by Heidi O'Neill, president of Nike Direct, and Adam Sussman, chief digital officer. The entity will bring together Nike.com, the management of directly operated retail operations and Nike+ digital products. The company says that innovations will be extended to its strategic wholesale partners.
As an example of recent innovations in the digital and retail space, Nike pointed to SNKRS Stash, which unlocks access to exclusive Nike and Jordan products using mobile geo-location. Another is Shock Drop, which creates surprise alerts for coveted sneakers, allowing consumers to buy instantly through the app or at their nearest Nike or partner store. Nike is preparing to launch its Nike+ and SNKRS apps globally.
As part of the implementation, the group's structure is changing from six to four geographic entities. Bert Hoyt, currently in charge of Western Europe, has seen his territory expanded to Europe, the Middle East and Africa (EMEA). This apparently covers the Central and Eastern Europe entity as well as several countries that were previously included in Emerging Markets. Nike declined to provide details on the plans for the function of Marc van Pappelendam, general manager for Central and Eastern Europe since 2014.
North America will remain under the leadership of Tom Peddie, while Angela Dong is confirmed as general manager of Greater China. Ann Hebert is taking charge of an entity combining Asia-Pacific and Latin America. This unit apparently bundles Japan with part of the former Emerging Markets region, which includes most Asian markets other than Japan and China. Hebert was previously in charge of Emerging Markets. All four regional leaders will report to Elliott Hill, president of geographies and integrated marketplace. The Nike brand's results will be reported along the lines of these four operating units from the 2018 fiscal year, which started at the beginning of June.
Spillane, Hill, O'Neill and Sussman will all report to Trevor Edwards, president of the Nike brand. He will drive the strategy, which requires further integration among the teams focusing on product categories and geographies, as well as the teams in charge of marketing, merchandising, digital technology and direct-to-consumer sales.
Nike had publicized a target to reach $50 billion in annual sales by the end of its 2020 fiscal year, but it has been under pressure more recently from fast-growing sales by the Adidas brand in the North American market. Futures orders for the Nike brand were down by 4 percent in reported terms and by 1 percent in constant currencies at the end of February. Nike is reporting its full-year results next Thursday.
